Crops Analysis | October 12, 2023

Crops Analysis
Crops Analysis
(Pro Farmer)

Corn

Price action: December corn futures jumped 8 cents before ending the session at $4.96, nearer the session high.

Fundamental analysis: Corn futures surged following the updated USDA reports today as corn production numbers fell more than expected. The Crop Production report showed production falling to 15.064 billion bu. from 15.134 billion bu. in September. This implies yield of 173 bu. per acre, whereas trade expected the corn yield to remain largely steady at 173.7 bu. per acre, according to a Bloomberg survey. USDA offset the feed and residual forecast and exports to make up for some of the cut in production. While exports are lagging the necessary pace the hit the current forecast and outstanding sales are poor, the feed and residual forecast was already below the historical average, today’s cut put it even further away what one might expect, especially as 2022-23 feed use was revised higher. The updated balance sheet pegs 2023-24 ending stocks at 2.111 billion bushels, down from 2.221 billion bu. in September. Ending stocks for 2022-23 tightened to 1.361 billion bu. from 1.452 billion bu. in September, the former will be the final for the crop year.

USDA raised Argentine corn production from 54.0 MMT to 55.0 MMT, though opted to leave Brazilian corn production unchanged at 129.0 MMT. World Weather Inc reports that the Argentine drought will prevail for a while longer, but relief is near and precipitation picks up in the latter half of the month.  The increase in rain is in time to support summer crops, likely warranting some of the increase seen in the USDA production estimate today. Meanwhile, extensive rains in Brazil are dampening planting efforts despite the fast start earlier this season, the forecaster says.

This morning, USDA announced a daily sale of 124,545 MT for delivery to Guatemala during the 2023-24 crop year. The agency is set to release the delayed export sales report tomorrow morning.

Technical analysis: December corn futures surged on the session, maintaining the recent uptrend on the daily bar chart. While futures advanced, bulls struggled to take out last week’s high of $4.99, with sellers coming in just shy of the level today. The continued destruction of fundamental demand continues to weigh on prices and the psychological $5.00 level seems a large barrier to cross. As the uptrend remains, bulls are seeking a daily close above $5.00 en route to additional resistance of $5.06 3/4. If bears maintain selling strength below $5.00, expect support at the 40-day moving average, currently at $4.89, backed by $4.85. Bears ultimate target is a daily close below stiff $4.74 1/2 support.

What to do: Get current with advised sales.

Hedgers: You should be 100% sold in the cash market on 2022-crop. You should be 50% forward priced for harvest delivery on expected 2023-crop.

Cash-only marketers: You should be 100% sold on 2022-crop. You should be 35% forward priced for harvest delivery on expected 2023-crop production.

 

 

Soybeans

Price action: November soybeans rose 37 1/2 cents to $12.90, the highest close since Sept. 28, after reaching a near four-month low overnight. December meal futures rose $15.80 to $392.90, the largest daily gain since June 30. December soyoil rose 65 points after notching a four-month low early on.

Fundamental analysis: Soybean bulls were summoned in the wake of USDA’s October data amid figures which fell short of pre-report estimates across the board. However, the most notable figure for the month was the over 4 MMT reduction in new-crop global ending stocks from last month and pre-report estimates. Meanwhile, despite increased carry-in from higher Sept. 1 stocks, 2023-24 U.S. carryover remained unchanged from September at 220 million bu. Total new-crop supplies were cut 23 million bu. to 4.403 billion bu., due to the 18 million bu. increase in supplies and 42-million-bu. cut to the 2023 bean crop estimate due to a 0.5 bu. cut to yield from September. On the demand side of the new-crop balance sheet, crush was increased 10 million bu., exports were cut 35 million bu. and residual use rose 2 million bu., putting total use at 4.183 million bu.

traders will be increasingly focused on planting and growing conditions in South America following USDA’s more-bullish-than-expected October crop data.While Brazil continues to forecast a record crop of 162 MMT, mother nature must cooperate in order to achieve the expected 4.8% year-over-year increase. World Weather Inc. reports most of Brazil and Paraguay will see a mix of rain and sunshine during the next two weeks that should allow for fieldwork to advance between rounds of rain, with the rain beneficial for summer crop planting with exceptions in southern Brazil and Paraguay where some heavy rain and flooding are likely during the next week. However, rain in northern Brazil may not be great enough to induce significant increases in soil moisture in many areas and much of the region will need greater rain soon or a continuation of regular rain into late this month to support newly planted crops.

Earlier today, USDA reported a daily sale of 295,000 MT for delivery to unknown destinations during 2023-24.

Technical analysis: November soybeans were able to gain significant technical traction, with a close held above the 10-day moving average of $12.72 and just shy of the 20-day moving average of $12.90 1/4. The 20-day will now serve as initial resistance, then at the psychological $13.00 level, then the 100-, 200- and 40-day moving averages of $13.11 1/2, $13.20 3/4 and $13.28 1/4. Conversely, initial support will now serve at the 10-day moving average, then at today’s low of $12.50 1/2, again at $12.44 1/4, $12.36 and $12.21.

December meal futures ended the session above the 20-, 100- and 40-day moving averages of $383.60, $391.60 and $392.40. Initial resistance will now serve at the 200-day moving average of $400.80, while support will lie at today’s failed resistance levels, then at 10-day moving average of $377.10 and again at $374.40, $371.80 and $369.30.

December soyoil futures were able to end the session well off earlier lows, just below initial resistance at 53.38 cents. A push above the area will face additional resistance at 54.05 and 54.49 cents and again at the 10-, 200-, 20- and 100-day moving averages of 55.03, 56.91, 57.06 and 57.97 cents, respectively. Meanwhile, initial support will continue to serve at 52.27 cents, then at 51.83 and 51.16 cents.

What to do: Get current with advised sales.

Hedgers: You should be 100% sold in the cash market on 2022-crop. You should be 45% forward sold for harvest delivery on expected 2023-crop production.

Cash-only marketers: You should be 100% sold on 2022-crop. You should be 40% forward sold for harvest delivery on expected 2023-crop production.

 

 

Wheat

Price action: December SRW wheat rose 15 1/2 cents to $5.71 1/2. December HRW wheat gained 7 3/4 cents at $6.75. Both markets closed nearer their session highs, with HRW hitting a more-than-two-year low early on. December spring wheat rose 5 1/4 cents to $7.23 1/2.

Fundamental analysis: Short covering was featured in the winter wheat futures markets today. The wheat markets were also boosted by solid gains in corn and soybean futures, in the wake of today’s monthly USDA supply and demand data. USDA put U.S. wheat carryover for 2023-24 at 670 million bu. That’s up 55 million bu. from last month and 23 million bu. above the average pre-report trade estimate. The agency put the national average on-farm cash wheat price for 2023-24 at $7.30, down 20 cents from last month.

A Russian drone strike hit a grain storage facility at a port in the southern Ukrainian region of Odesa, damaging some of the stored grain, though Ukrainian officials didn’t disclose how much grain was damaged.

Weather in major global wheat-producing regions leans friendly for prices. World Weather Inc. today said U.S. hard red winter wheat and wheat in the Pacific Northwest will need greater rain for improved crop establishment. Meantime, Russia and Ukraine winter crop areas still need greater precipitation to ensure the best winter crop establishment.  India’s possible rain in the north later this weekend and into next week could help get winter wheat off to a better-than-expected start for an El Nino year. Dryness in Western Australia is still a big concern for small grain production. Brazil wheat is still facing a grain quality decline because of too much moisture. Argentina is still dealing with drought, said the forecaster.

Technical analysis: Winter wheat futures prices are still in 2.5-month-old downtrends on the daily bar charts. Bears have the solid near-term technical advantage. SRW bulls' next upside price objective is closing December prices above solid chart resistance at $6.10. The bears' next downside objective is closing prices below solid technical support at $5.25. First resistance is seen at the October high of $5.81 1/2 and then at $5.90. First support is seen at $5.60 and then at today’s low of $5.47 1/4.  The HRW bulls' next upside price objective is closing December prices above solid technical resistance at $7.25. The bears' next downside objective is closing prices below solid technical support at $6.25. First resistance is seen at this week’s high of $6.90 1/4 and then at $7.00. First support is seen at today’s low of $6.55 1/4 and then at $6.50.

What to do: Get current with advised sales.

Hedgers: You should be 50% sold in the cash market on 2023-crop production.

Cash-only marketers: You should be 50% sold on 2023-crop production.

 

 

Cotton 

Price action: December cotton fell 13 points to 84.92 cents and traded the lowest level since Aug. 22 early on.

Fundamental analysis: December cotton futures edged lower for the fourth straight session despite USDA’s cuts to new-crop production and carryover. An unexpected increase in the Consumer Price Index (CPI) was the likely culprit in cotton’s muted response to USDA’s October crop data. CPI rose 3.7% compared to the previous year, which was higher than the estimated 3.6%. The news sent the U.S. dollar skyrocketing higher, making U.S. supplies more expensive on the global marketplace.

World Weather Inc. reports conditions in Argentina remain too dry for cotton germination, emergence and establishment in the north, although some planting has likely begun. However, rain is expected to evolve near and beyond mid-month. Meanwhile, Brazil’s center-south cotton areas are too wet for fieldwork, delaying progress. Additional rains are expected periodically, keeping cotton areas wet for a while.

In the U.S. limited rain in cotton maturation and harvest areas of Texas and the Delta will be great for protecting fiber quality, though rain is expected in Texas during the second half of the week next week which may raise a little concern over fiber quality, although the precip should be brief enough to limit the impact. Rain in the southeastern U.S. Wednesday is expected to delay harvesting and induce some yellowing of mature cotton fiber. Drier weather will be quick to resume Friday into next week allowing the environment to improve once again.

Technical analysis: December cotton futures ended narrowly lower, with support at the 100-day moving average of 84.06 cents limiting losses. Extended selling efforts below the area, however, will face additional support at 83.42 cents and again at 82.47 cents and the June 27 low of 76.81 cents. Meanwhile, corrective buying efforts will continue to face initial resistance at 86.01 cents, then at the 10-, 40- and 20-day moving averages of 86.54, 86.77 and 86.95 cents.

What to do: Get current with advised sales.

Hedgers: You should be 100% priced on 2022-crop in the cash market. You should have 60% of expected 2023-crop production forward sold for harvest delivery.

Cash-only marketers: You should be 100% priced on 2022-crop. You should have 60% of expected 2023-crop production forward sold for harvest delivery.

 

 

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